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Goldman chairman Lloyd Blankfein met privately with Jho Low
[NEW YORK] One day in December 2012, a young Malaysian VIP entered the gleaming headquarters of Goldman Sachs in New York. The man, Jho Low, a financier with close ties to Malaysia's prime minister, was there for a private meeting with one of the most powerful people on Wall Street: Goldman's longtime chairman and chief executive, Lloyd Blankfein.
Nearly six years later, Low is an international fugitive, accused of being the mastermind in a multibillion-dollar fraud involving a Malaysian government investment fund. Goldman's role in supporting the fund, known as 1 Malaysia Development Berhad, or 1MDB, has brought intense scrutiny from federal prosecutors, who this month unsealed criminal charges against two former Goldman investment bankers and implicated a senior executive.
The meeting between Low and Mr Blankfein, described to The New York Times by three people familiar with it, shows the expanding scope of a scandal that is rocking Goldman. Federal prosecutors are examining the 2012 meeting as they conduct a criminal investigation of the bank, two of the people said. And the existence of a face-to-face meeting between Goldman's chief executive and the man accused of being at the center of a sprawling fraud undercuts an argument the bank has made: that its problems stem from the actions of a small number of rogue employees.
Goldman said this month that it could face "significant fines" related to the scandal. In another sign of the bank's mounting problems, Abu Dhabi's state energy investment company sued Goldman in New York state court Wednesday, accusing bank employees of bribing Abu Dhabi officials.
The 2012 meeting at Goldman headquarters, which took place in mid-December, was one of at least two occasions on which Mr Blankfein was in a room with Low, but it was the only time that the Malaysian financier had a personal audience with the Goldman chief executive. Two of the people familiar with the 2012 meeting said that it was a one-on-one sit-down.
A Goldman spokesman, Jake Siewert, said Mr Blankfein had a meeting with Low on Dec. 14, 2012, but that it was also attended by Mohamed Ahmed Badawy Al-Husseiny, who ran an Abu Dhabi investment fund, Aabar. "Mr. Blankfein had an introductory, high-level meeting in December 2012 with the CEO of Aabar, which was an existing client of the firm," Mr Siewert said. "At Aabar's request, Mr. Low accompanied the CEO to that meeting."
After this article was published online, Mr Siewert added: "Mr. Blankfein does not recall any one-on-one meeting with Mr Low, nor have we seen any record to suggest such a meeting occurred."
In the lawsuit filed on Wednesday, Mr Husseiny's former employer accused him of accepting bribes related to 1MDB deals; he was also named in a 2016 civil proceeding that federal prosecutors filed to try to recover some of the money looted in those deals.
Mr Blankfein's tenure as chief executive ended on Oct 1, but he remains chairman of the bank's board of directors. He is scheduled to cede that job and to assume an honorary boardroom role effective Jan 1.
In the three years before the 2012 meeting, the bank's compliance staff had repeatedly rejected Low's attempts to become a Goldman client because it was unclear how he had amassed his wealth. But when Mr Blankfein's aides sought information about Low in preparation for the meeting, a senior investment banker in Asia praised Low and did not mention the compliance concerns, according to a person who has reviewed internal Goldman emails about the meeting.
Nor did the compliance red flags stop the bank from doing extensive business with 1MDB, which Malaysia's prime minister had set up in 2008 ostensibly to invest in infrastructure and other projects to improve Malaysians' daily lives. Goldman ultimately helped 1MDB sell more than US$6 billion in bonds to investors, earning about $600 million in fees.
Prosecutors in Malaysia and the United States have accused Low of looting hundreds of millions of dollars from 1MDB for himself and the friends and family of former Prime Minister Najib Razak. Voters ousted Najib this year, and Malaysian authorities charged him and his wife with embezzlement. The couple have denied wrongdoing, and through his lawyers, Low has maintained that he is innocent.
The 1MDB bond deals were arranged in large part by a senior Goldman banker in Asia named Tim Leissner. He also facilitated the meeting between Low and Blankfein, according to the three people familiar with the meeting. Leissner pleaded guilty in August to bribery and money-laundering charges in connection with the 1MDB bond deals.
Prosecutors have described Goldman bankers as playing a crucial role in enabling Low's activities. The Justice Department charged Leissner and his deputy, Roger Ng, with violating bribery and money-laundering laws. The charging documents, unsealed in federal court on Nov 1, referred to an unidentified Goldman executive as an unindicted co-conspirator who approved of the alleged bribery. People familiar with the matter said that executive was Andrea Vella, who was Goldman's co-head of Asian investment banking. The bank suspended him the same day that prosecutors unsealed the criminal complaints.
In addition to the Justice Department's criminal investigation, the Federal Reserve is preparing an enforcement action against Leissner, Ng and Vella, according to a person familiar with the Fed's plans. The New York Department of Financial Services is also investigating, according to a person familiar with the agency's work.
David Solomon, who recently succeeded Mr Blankfein as Goldman's chief executive, sent a voicemail message to all bank employees last week, telling them how upset he was about the situation.
"I am personally outraged that any employee of the firm would undertake the actions spelled out in the government's pleadings," he said. "A group of people, including some of us in the executive office, are intensely focused on this matter."